Rating Rationale

Rating Rationale
Brickwork Ratings assigns ‘BWR B+’ & ‘BWR A4’ for the Bank Loan Facilities
aggregating ₹ 9.87 Cr of Sre Vengadalakshmi Spinners.
Brickwork Ratings (BWR) has assigned the following Ratings1 for the Bank Loan Facilities of ₹
9.87 Cr of Sre Vengadalakshmi Spinners. (SVS or ‘the concern’):
Facility
Amount
( ₹Cr)
Fund Based
Cash Credit
Term Loan II (Review)
Term Loan III (Review)
Term Loan IV (Review)
Term Loan V(Fresh)
7.85
0.25
0.13
0.09
0.47
Non-Fund Based
Inland Letter of Credit
Guarantee
1.00
0.08
Total
9.87
Tenure
Rating
BWR B+
(Pronounced BWR B Plus)
Long Term
Outlook : Stable
BWR A4
(Pronounced BWR A four)
Short Term
(INR Nine Crores and Eighty
Seven Lakhs only)
BWR has principally relied upon the audited financial results up to FY13, Provisional financials
of FY14 and projected financials of FY15 of SVS, publicly available information and
information/clarification provided by the concern.
The ratings reflect the extensive industry experience of the proprietor’s, long track record of
operations and established clientele. The ratings are, however, constrained by SVS’s small scale
of operations, below-average financial risk profile marked by a small net worth, high gearing,
thin profit margins, highly fragmented and competitive nature of the industry with exposure to
volatility in raw material prices.
Background:
SVS was established in 1999 by Mrs.R.Pushpa. It is engaged in production and sales of cotton
yarn of various counts. They have own manufacturing unit in 35,000 sqft and they have taken
premises on lease (12,000 sqft) for additional spindles. The manufacturing capacities for both
the units are 18,000 spindles with production capacity of 200 tons per month.
The concern market its products through direct marketing and generally sells its products to
weaving units situated at Somanur, Coimbatore, Tirupur etc and also many parts of
Maharashtra, Calcutta, Madhya Pradesh. At present the concern has a total strength of 160
employees for production.
1
Please refer to www.brickworkratings.com for definition of the Ratings
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1
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Management
Mrs. R.Pushpa, W/o.D.Rajamanickam is Proprietrix of the concern. She has wide knowledge in
the area of financial management. She is taking care of finance and labour management. She has
been assisted by her husband Mr.Rajamanickam, who has rich experience in the textile industry.
He is taking care of the purchase and sales department.
Financial Performance
SVS reported a profit after tax (PAT) of ₹0.14 Cr. on Net Sales of ₹24.71 Cr. for FY 13 as against
profit after tax (PAT) of ₹0.11 Cr. on Net Sales of ₹21.91 Cr. for FY12. Tangible net worth stood as
on March 31, 2013 was ₹3.65 Cr. Debt to Equity ratio is stood at 2.34 times in FY 13 as
compared to 2.72 times in FY12. Operating Profit Margin fluctuates every year due to variation
in raw material prices. Current ratio improved to 1.36 times in FY13 from 1.29 times in FY12.
Rating Outlook
Currently, the outlook remains stable. Going ahead, the ability of the concern to increase its
scale of operations, manage raw material prices fluctuations, strengthen its capital structure ,
improve its financial risk profile and manage its working capital efficiently would be the key
rating sensitivities.
Analyst Contact
Relationship Contact
[email protected]
[email protected]
Phone
Media Contact
1-860-425-2742
[email protected]
Disclaimer: Brickwork Ratings (BWR) has assigned the rating based on the information obtained from the issuer and other reliable sources,
which are deemed to be accurate. BWR has taken considerable steps to avoid any data distortion; however, it does not examine the precision or
completeness of the information obtained. And hence, the information in this report is presented “as is” without any express or implied warranty
of any kind. BWR does not make any representation in respect to the truth or accuracy of any such information. The rating assigned by BWR
should be treated as an opinion rather than a recommendation to buy, sell or hold the rated instrument and BWR shall not be liable for any losses
incurred by users from any use of this report or its contents. BWR has the right to change, suspend or withdraw the ratings at any time for any
reasons.
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3 Nov 2014
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